Kentucky Business Closures Help “Flatten the Curve,” But Are They Constitutional?

Blog Post | 108 KY. L. J. ONLINE | Mar. 26, 2020

Kentucky Business Closures Help “Flatten the Curve,” But Are They Constitutional?

Robert Hudson

 Because COVID-19 spreads rapidly through human contact, governments across the world have prohibited most forms of public gatherings to curb infection rates. In Kentucky, Governor Andy Beshear issued executive orders requiring many businesses to close some or all of their operations. For some of these businesses, complying with Beshear’s orders means complete closure until further notice, which could lead to bankruptcy. Over half of U.S. states have issued similar business closure orders.[i]

Despite their effectiveness in slowing the spread of the virus, some government officials and social media personalities have denounced these measures as unconstitutional exercises of government power.[ii]The U.S. Constitution, however, reserves “police powers” to the states.[iii] “Police powers” include a state’s authority to regulate behavior to protect the health, safety, and general welfare of its inhabitants.[iv] According to the Kentucky Supreme Court, a valid exercise of police power must "bear a real and substantial relationship to the public health, safety, morality or some other phase of the general welfare."[v] Valid exercises of state police power do not constitute takings of property without due process of law.[vi]  

Both the Kentucky Supreme Court and the U.S. Supreme court have held that, through their police powers, states can enact laws to prevent the spread of disease.[vii] During the early-1900s smallpox outbreak, the Kentucky Supreme Court upheld the constitutionality of state laws that closed stores for sanitization and quarantined individuals suspected to have the disease.[viii] In Jacobson v. Commonwealth of Massachusetts, the U.S. Supreme Court held constitutional a state law that implemented mandatory vaccinations.[ix] The Court opined that a state “has the right to protect itself against an epidemic” and its members “may at times, under the pressure of great dangers, be subjected to … restraint, to be enforced by reasonable regulations, as the safety of the general public may demand.”[x] The U.S. Supreme Court also upheld the constitutionality of state laws that imposed forced quarantines.[xi] 

Most developed countries have enacted similar business-closure policies to slow the spread of COVID-19 and protect the health of their citizens. Italy was initially reluctant to implement such policies, but the ensuing health emergency forced it to impose a full lockdown.[xii] Governor Beshear’s orders “bear a real and substantial relationship” to the health of Kentuckians. They are very likely constitutional as a valid exercise of state police powers. 

[i] Brakkton Booker, States Are Taking Many Approaches To The Coronavirus. Here's A Look At Each, NPR (Mar. 12, 2020), https://www.npr.org/2020/03/12/815200313/what-governors-are-doing-to-tackle-spreading-coronavirus.

[ii] Elizabeth Joh, Yes, States and Local Governments Can Close Private Businesses and Restrict Your Movement, Politico (Mar. 18, 2020), https://www.politico.com/news/magazine/2020/03/18/states-police-power-coronavirus-135826.

[iii] Joh, supra note 2. 

[iv] Joh, supra note 2.  See also John Malcolm, In Combating Coronavirus, Trump and Governors Act Constitutionally, The Heritage Foundation (Mar. 20, 2020), https://www.heritage.org/the-constitution/commentary/combating-coronavirus-trump-and-governors-act-constitutionally; John Yoo, Pandemic Federalism, National Review (Mar. 20, 2020), https://www.nationalreview.com/2020/03/pandemic-federalism/; Debra Cassens Weiss, Lawsuits over coronavirus quarantines are unlikely to succeed, experts say, American Bar Association (Mar. 18, 2020), https://www.abajournal.com/news/article/suits-over-coronavirus-quarantines-unlikely-to-succeed-experts-say. 

[v] Dep’t For Nat. Res. & Envtl. Protection v. Stearns Coal & Lumber Co., 563 S.W.2d 471, 473 (Ky. 1978).

[vi] Andrew Napolitano, Judge Andrew Napolitano: Coronavirus fear lets government assault our freedom in violation of Constitution, Fox News (Mar. 19, 2020), https://www.foxnews.com/opinion/judge-andrew-napolitano-liberty-coronavirus; New Orleans Pub. Serv. v. City of New Orleans, 281 U.S. 682, 87 (1930) (“ It is elementary that enforcement of uncompensated obedience to a regulation passed in the legitimate exertion of the police power is not a taking of property without due process of law”). 

[vii] See, e.g., Allison v. Cash, 137 S.W. 245, 249 (Ky. 1911); Jacobson v. Commonwealth of Massachusetts, 197 U.S. 11, 39 (1905).

[viii] See, e.g., Allison, 137 S.W. at 249; Jacobson, 197 U.S. at 39. 

[ix] See, e.g., Allison, 137 S.W. at 249; Hengehold v. City of Covington, 57 S.W. 495, 497 (Ky. 1900). 

[x] Jacobson, 197 U.S. at 27-29; David B. Rivkin Jr. & 

Charles Stimson, A Constitutional Guide to Emergency Powers, Wall Street Journal (Mar. 19, 2020), https://www.wsj.com/articles/a-constitutional-guide-to-emergency-powers-11584659429.

[xi] Malcolm, supra note 4. 

[xii] Dave Lawler, Timeline: How Italy's coronavirus crisis became the world's deadliest, Axios (Mar. 24, 2020), https://www.axios.com/italy-coronavirus-timeline-lockdown-deaths-cases-2adb0fc7-6ab5-4b7c-9a55-bc6897494dc6.html.

From 1973 to Today: The Risks of Funding Public Education by the Property Tax

Blog Post | 108 KY. L. J. ONLINE | Mar. 5, 2020

From 1973 to Today: The Risks of Funding Public Education by the Property Tax  

By Morgan King[1]

The property tax has been a source of revenue for governments since the days of feudal England.[2] Following the American Revolution, the new government levied a property tax to be used for the local benefit of those owning property.[3] In modern America, school districts rely on the local property tax to fund public school education.[4] 

The revenue from property is received from the land and improvements to land, which generates a tax “equal to the percentage of taxable value of the property.”[5] It follows that not all property, and further, jurisdictions, are taxed uniformly. A neighborhood with many businesses generates higher property taxes than empty lots in a rural area. Thus, a jurisdiction with lower home values generates less property taxes than any wealthier neighboring jurisdictions. Despite the inequality, schools in these jurisdictions are left to educate students uniformly, yet that education can vary dependent solely upon the resources available.[6]

In 2016, NPR presented a report on the variation of school funding across the United States.[7] The data found that, across the country, students “in the same grade attending schools” are educated “with wildly different resources.”[8] In Kentucky, the data shows variation across the state, with the majority of the state falling at or below the national average of school district spending per student.[9] In Northern Kentucky, for example, the disparity of funding per student compared to its southern county neighbors is particularly disproportionate.[10]

Property taxes affecting education inequality is not a novel idea. In the 1973 Supreme Court case San Antonio Independent School District v. Rodriguez, a group of plaintiffs brought a claim against the constitutionality of funding public schools.[11] The disparity between two school districts in San Antonio was the basis of the complaint, comparing one poor, school district in San Antonio against its more affluent neighboring school district.[12]  Upon the idea that “education is perhaps the most important function of state and local governments” and “must be made available to all on equal terms” that Brown v. Board of Education held,[13] the plaintiffs made their case that using property taxes to fund school districts inherently keeps lower-income communities from attaining the same education as those with school districts funded by higher property values.[14] The Supreme Court held against the plaintiffs. In the opinion, Justice Powell reasoned that because the plaintiffs were not outright denied an education because of their economic status, the government could not intervene under a strict scrutiny standard.[15]

 Therefore, the inequality of school funding remained. In order to alleviate the disparity, some states have instead imposed a limit on the property tax rate for local school districts, making up the difference in revenue with increases in other taxes and providing an oversight role for the state.[16] Michigan, for example, was successful with this reform, one report noting improved levels of academic achievement by this method.[17]

The NPR Report highlighted that education inequality based upon funding is as much as an issue today as it was in 1973. When considering what an equal and rewarding education for every student represents, states should take note at how geographic location and tax plays a role.  

[1] Staff Editor, Ky. L. J., Vol. 108. 

[2] Alana Semuels, The Feudal Origins of America’s Most-Hated Tax, Atlantic (Aug. 24, 2016), https://www.theatlantic.com/business/archive/2016/08/the-feudal-history-of-property-tax-in-america/497099/.

[3] Id.

[4] Cory Turner et al., Why America's Schools Have a Money Problem, NPR (Apr. 18, 2016, 5:00 AM), https://www.npr.org/2016/04/18/474256366/why-americas-schools-have-a-money-problem.  

[5] How do State and Local Property Taxes Work?, Tax Pol’y Center, https://www.taxpolicycenter.org/briefing-book/how-do-state-and-local-property-taxes-work.

[6] Alana Semuels, Good School, Rich School; Bad School, Poor School, Atlantic (Aug. 25, 2016), https://www.theatlantic.com/business/archive/2016/08/property-taxes-and-unequal-schools/497333/.

[7] Turner et al., supra note 4.

[8] Id.

[9] Id.

[10] Id.

[11] San Antonio Indep. Sch. Dist. v. Rodriguez, 411 U.S. 1 (1973).

[12] Jeffrey S. Sutton, San Antonio Independent School District v. Rodriguez and its Aftermath, 94 Va. L. R. 1963 (2008); see also Turner et al., supranote 4. 

[13] Sutton, supra note 12, at 1963 (quoting Brown v. Bd. of Educ., 347 U.S. 483, 493 (1954)).

[14] Rodriguez, 411 U.S. at 1.

[15] Sutton, supra note 12, at 1969.

[16] Frequently Asked Questions on the Property Tax, Nat’l Conf. St. Legis., https://www.ncsl.org/research/education/funding-approaches-the-property-tax-and-public-ed.aspx.

[17] Joydeep Roy, Impact of School Finance Reform on Resource Equalization and Academic Performance: Evidence from Michigan, 6 Educ. Fin. Pol’y 137, 138 (Spring 2011).  

Supreme Court Denies Cert, Allows State Double Taxation on Foreign Income

Blog Post | 108 KY. L. J. ONLINE | Mar. 3, 2020

Supreme Court Denies Cert, Allows State Double Taxation on Foreign Income 

Ellen Hancock[1]

On February 24, 2020 the Supreme Court of the United States denied certiorari on a case concerning Utah’s tax statute which subjects foreign-earned income to double taxation.[2]  The taxpayers in this case were shareholders of Steiner, LLC, a subchapter S corporation, that from 2011-13 generated 2% of its income from activities within Utah and 98% from “interstate and foreign business activities.”[3] Under the Utah tax code, income is taxed at a flat rate no matter the country of origin.[4] To prevent double-taxation, Utah offers its residents a credit for the taxes paid on income tax paid in other state; however, these same credits are not offered for income tax paid on income generated in foreign jurisdictions.[5] At the Utah Supreme Court, the taxpayers argued that the foreign-earned income should be excluded under Utah Code Ann. § 59-10-115(2), which allows equitable adjustments in the Utah tax code to be made on an individualized nature, because taxing this income would subject the Steiners to double taxation.[6] However, the Utah Supreme Court voted 5-0 against the taxpayers.[7] 

This decision surprised many because of the previous U.S. Supreme Court decisions Comptroller v. Wynne and Kraft v. Department of Revenue.[8] In Wynne, the Court looked at a Maryland tax case in which the taxpayers were shareholders of Maxim Healthcare Services, a company that filed tax returns in 39 states through its shareholders.[9]  The taxpayers had included the tax that they had paid for Wynne in other states in calculating their Maryland county taxes, where they were residents, which the Maryland tax court rejected.[10] However, the Court found that the Maryland tax system, which did not allow credits for tax paid in other states, violated the dormant Commerce Clause because it discriminated against interstate commerce.[11]  Likewise, the Supreme Court’s decision in Kraft is even more distinctly in contrast with Steiner. In 1992, the Supreme Court looked at an Iowa tax statute which did not allow a tax credit for foreign-earned income.[12] Significantly, in Kraft the Court even expanded upon their decision stating that foreign income and commerce should be afforded even “greater protection from discrimination than interstate commerce.”[13]

Looking at these decisions it’s hard to see why the Supreme Court would deny certiorari on the Utah Supreme Court’s decision in Steiner, which seems to directly contradict Wynne and Kraft. These cases represent the Supreme Court’s repeated commitment to avoiding double taxation which the Steiner case explicitly authorizes. Likewise, aside from going against the Supreme Court precedent, the decision to double-tax foreign income seems unfair and counter-productive. For example, if businesses are going to be subject to income tax in more than one jurisdiction, it could make international business too expensive to operate and could impair economic growth.[14]  It is also inequitable for any Utah business owners who already pay income tax on their income earned in the state, to have to be subjected to additional tax on their foreign income that has already had taxed pay on it. This not only disincentives any benefits that may come to United States tax payers who may be doing business abroad at a lower income tax rate, but also takes it a step further and penalizes them for bringing more income from foreign countries into the United States. 

Based on the Supreme Court denying certiorari in Steiner, it appears that at least for a while the Supreme Court is going to allow policies that subject foreign income for double taxation. However, in the meantime, it is important to note that for federal income tax, credits already exist for tax paid on foreign income to prevent this type of unfair and illogical treatment.[15]

[1] Staff Editor, Kentucky Law Journal, Volume 108; J.D. Candidate, The University of Kentucky J. David Rosenberg College of Law; B.A., Miami University of Ohio (2017).

[2] Steiner v. Utah State Tax Commission, SCOTUS Blog (Feb. 24, 2020), https://www.scotusblog.com/case-files/cases/steiner-v-utah-state-tax-commission/. 

[3] Court: Utah Tax Structure Treatment Violates Foreign Commerce Clause, Grant Thorton (Jan. 10, 2020) [hereinafter Grant Thorton],https://www.grantthornton.com/library/alerts/tax/2019/SALT/U-Z/UT-tax-structure-violates-foreign-commerce-clause-01-09.aspx#foot-note. 

[4] Id.

[5] Id.

[6] Bruce P. Ely & Steven N. Wlodychak, Utah Court Refuses to Extend Protections of Foreign Commerce Clause to Individuals, Bradley (Sept. 17, 2019), https://www.bradley.com/insights/publications/2019/09/utah-court-refuses-to-extend-protections-of-foreign-commerce-clause-to-individuals.

[7] Id. 

[8] Grant Thorton, supra note 3.

[9] Comptroller of the Treasury of Maryland v. Wynne, 135 S. Ct. 1787 (2015). 

[10] Id. 

[11] Id.

[12] Kraft Gen. Foods v. Iowa Dep’t of Revenue & Fin., 505 U.S. 71 (1992). 

[13] Ely & Wlodychak, supra note 6.

[14] Julia Kagan, Double Taxation, Investopedia (Aug. 20, 2019), https://www.investopedia.com/terms/d/double_taxation.asp.

[15] Foreign Tax Credit, IRS (Dec. 20, 2019), https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit. 

The Legalities of Leap Day: A Survey of Modern and Historical Jurisprudence

Blog Post | 108 KY. L. J. ONLINE | Feb. 25, 2020

The Legalities of Leap Day: A Survey of Modern and Historical Jurisprudence

Sean Meloney

Of the cartoonish realities we unquestioningly encounter in this world, the existence of a Leap Day is among the most delightfully absurd. Since 1852, astronomers have recognized that the Earth’s revolution around the sun requires 365 days plus an additional six hours.[1] Thus, in order to correct the calendar, every fourth year, an additional day is tacked on to the end of February as a leap day.[2] Although many have contemplated the effects that having a Leap Day birthday might have on one’s life and psyche[3], there exist a myriad of logistical and legal problems associated with this extra day as well.[4] In particular, the legal field frequently encounters complications caused by leap days in the calculation of statutes of limitation, criminal sentences, and age determination disputes.

In enforcing compliance with the Rules of Civil Procedure, courts generally apply one of two theories to calculating dates.[5] In applying the “calendar method,” some courts have held that years are measured as any consecutive 365-day period, regardless of the beginning and ending date.[6] Under this theory, a leap day acts to “shorten” a statute of limitations. Other courts have instead applied the “anniversary method,” which finds that “the last day for accomplishing an act is the anniversary date of the period’s commencement, which would make any one-year period encompassing a leap day 366 days.”[7] Thus, courts have found that leap days need not affect the calculation of interest rates[8], the time limit required for an appeal[9], or accrual of spousal survivorship benefits.[10]

In the criminal sentencing context, courts treat leap days with less flexibility. Generally, criminal sentencing abides strictly by the “anniversary method,” which finds that a year is a twelve month period commencing on the first day of the sentence and ending on the same day of the same month in the subsequent year.[11] Courts often refer to the language of sentencing being in years, rather than days, to rationalize the inclusion of leap days within the sentence.[12] However, in the case of Habibi v. Holder, the Ninth Circuit held that when a defendant is sentenced to a prison term of one year, the sentence is for 365 days, regardless of whether or not it takes place during a leap year.[13]

In regard to birthdates, although not confined to leap day birthdates, the common law rule was that a person attains majority on the day directly preceding his 21st birthday.[14] This rule did not just apply to reaching majority, but also to the calculation of age for purposes of levying poll taxes.[15] At present, this is the same rule used by the Social Security Administration to calculate the termination of a child’s insurance benefits.[16]

Nationally, little consistency exists among the courts’ treatment of leap days in both civil and criminal contexts. The Supreme Court has not addressed this issue since 1935, when it considered a case in admiralty about a failure to pay timely wages.[17] With over 10,000 babies anticipated to be born in the U.S.[18] and over 1,200 federal suits anticipated to be filed on this year’s leap day[19], the frequency of leap day issues will only grow in complexity and confusion until the Court provides clarity on how exactly we count a leap day.

[1] David Ewing Duncan, Calendar 17–22 (1998).

[2] Id.

[3] See United States v. Clements, 522 F.3d 790, 793 (7th Cir. 2008); Daniel Nester, The Leap-Day Baby’s Paradox, The Atlantic (February 29, 2016), https://www.theatlantic.com/entertainment/archive/2016/02/the-leaplings-birthday-paradox/470361/; Meg Bryant, ‘Leap Year Babies’ Still Face Medical Records Challenges, Health Care Dive (February 29, 2016), https://www.healthcaredive.com/news/leap-year-babies-still-face-medical-records-challenges/414660/; Lizzie Hedrick, Happy Leap Day: The Fun and Folly of Having a Birthday Every Four Years, USC News (February 29, 2016), https://news.usc.edu/92431/happy-leap-day-the-fun-and-folly-of-having-a-birthday-every-four-years/.

[4] Michelle McQuigge, The Hassles of Being a Leap Year Baby, Global News (February 25, 2016), https://globalnews.ca/news/2539442/the-hassles-of-being-a-leap-year-baby/.

[5] Fields v. Expedited Logistics Sols. LLC, No. 5:16-cv-00728-JMC, 2016 U.S. Dist. LEXIS 170606, at *8–9 (D.S.C. Dec. 9, 2016).

[6] Id.

[7] Id.

[8] In re Oil Spill by Amoco Cadiz off the Coast of Fr. on Mar. 16, 1978 v. Amoco Transp. Co., 4 F.3d 997 (Table) (7th Cir. 1993).

[9] Rice v. Blair, 166 S.W. 180 (Ky. 1914).

[10] Albertson v. Apfel, 247 F.3d 448, 449 (2nd Cir. 2001).

[11] Yokley v. Belaski, 982 F.2d 423, 424­–25 (10th Cir. 1992).

[12] Commonwealth v. Melo, 843 N.E.2d 659, 661 (Mass. App. Ct. 2006).

[13] Habibi v. Holder, 673 F.3d 1082, 1088 (9th Cir. 2010).

[14] United States v. Wright, 197 F. 297, 298 (8th Cir. 1912); Thomas v. Couch, 156 S.E. 206 (Ga. 1930); Nelson v. Sandkamp, 34 N.W.2d 640, 642 (Minn. 1948).

[15] Frost v. State, 45 So. 203, 204 (Ala. 1907).

[16] 20 C.F.R. § 404.2(c)(4) (2018); SSR 63-15, 1960–1974 Soc. Sec. Rep. Serv. 128.

[17] McCrea v. United States, 294 U.S. 382 (1935).

[18] Joyce Martin et al., Births: Final Data for 2018, 68 National Vital Statistics Reports 1 (November 27, 2019), https://www.cdc.gov/nchs/data/nvsr/nvsr68/nvsr68_13-508.pdf.

[19] Federal Judicial Caseload Statistics 2018, https://www.uscourts.gov/statistics-reports/federal-judicial-caseload-statistics-2018 (last visited Feb. 25, 2020).